HOW TO REACH CHINESE E-CONSUMERS - A PRACTICAL GUIDE FOR SMALL BUSINESSES - TRADE IMPACT FOR GOOD - ITC
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HOW TO REACH CHINESE E-CONSUMERS
A PRACTICAL GUIDE FOR SMALL BUSINESSES
TRADE IMPACT
FOR GOOD
How to reach Chinese e-consumers A practical guide for small businesses
How to reach Chinese e-consumers About the paper This report helps small businesses tap into the Chinese e-commerce market, which is the world’s largest. The publication recommends cross-border e-commerce, which allows opening stores in marketplaces rather than opening Chinese sites. It provides systematic instructions on the process, including logistics and payments. This publication is a complement to a prior introductory paper titled E-Commerce in China: Opportunities for Asian Firms in cooperation with AliResearch, which can be download from this link: https://goo.gl/fPWA9f. Publisher: International Trade Centre Title: How to reach Chinese e-consumers: A practical guide for small businesses Publication date and place: Geneva, January 2018 Page count: 66 Language: English Document number: SEC-18-5.E For more information, contact: Mohamed Es Fih (esfih@intracen.org) ITC encourages the reprinting and translation of its publications to achieve wider dissemination. Short extracts of this paper may be freely reproduced, with due acknowledgement of the source. Permission should be requested for more extensive reproduction or translation. A copy of the reprinted or translated material should be sent to ITC. Digital image(s) on the cover: © Shutterstock © International Trade Centre (ITC) ITC is the joint agency of the World Trade Organization and the United Nations. ii
How to reach Chinese e-consumers
Foreword
Chinese consumers are some of the most eager and forward-looking e-commerce participants. It is therefore
not surprising that the Chinese e-commerce retail market is estimated to be the world’s largest, accounting for
nearly 50% of global online retail sales. 1 The country is also the source of many of the products that drive
international e-commerce: through Alibaba and other online platforms, including Amazon, Chinese firms are
shipping goods ordered over the Internet around the world.
Within China, clusters of firms have formed in distinct geographical locations, sharing expertise and common
logistics platforms. Assisted by favourable government policies, they continue to develop their e-commerce
export business: both business-to-business (B2B) and business-to-consumer (B2C). Domestically, the
development of e-commerce has transformed the retail sector, and, at just more than $1.1 trillion, online B2C
sales represent more than 17% of the country’s total retail sector: according to the investment bank, Goldman
Sachs, double digit annual growth in revenues is expected to grow this share to 25% by 2020.
This offers powerful opportunities to small firms that can navigate this fast-growing market. Serving Chinese
consumers offers great attraction to small producers in the region, many of which have unique products that
could find attractive market niches in China. However, the market remains somewhat impenetrable – even
beyond the real issue of understanding local language and culture. Foreign firms cannot register directly on
the biggest e-commerce platforms and smaller firms are unlikely to get distribution deals. However, thanks to
an increasingly popular form of online marketplace provided by cross-border e-commerce platforms, foreign
sellers can now open a store and ship goods directly into China.
This report provides step-by-step instructions on how to sell in these marketplaces. Our goal is to share this
information and, through our supporting work with enterprises in other Asian countries and beyond, facilitate
successful examples of small foreign firms entering the Chinese market through digital channels. The first such
small firms are beginning to build their presence, and we aim to support the scaling up of this success.
We are grateful to the Ministry of Commerce of the People’s Republic of China for financing this study, and
the small firms in six Asian least developed countries – Afghanistan, Bangladesh, Cambodia, the Lao People’s
Democratic Republic, Myanmar and Nepal – which have shared their experiences in accessing the Chinese
market.
This practical guide is a complement to a joint study with Alibaba, E-Commerce in China: Opportunities for
Asian Firms, published in 2016. We hope that this guide helps small and medium-sized enterprises take
advantage of the new opportunities by reducing the sometimes real and assumed complexities of e-commerce
in China.
Arancha González
Executive Director
International Trade Centre
1
eMarketer Report, Worldwide Retail and Ecommerce Sales: eMarketer's Estimates for 2016–2021, 18 July 2017.
iii
How to reach Chinese e-consumers Acknowledgements ITC’s E-Solutions programme prepared this publication, under the direction of Mohamed Es Fih and James Howe. We wish to acknowledge the contribution of four advisors: Edward Donald, who played a leading role as a consultant for the design of the e-Exporting Programme of the United Kingdom Government; Chao Liu, founder of Avenue51, an Alibaba-certified partner; Betty Touzeau, founder of Paris2Beijing; and Xie Chao, founder of the Beijing Wei Shang Intellectual Property Agency. Vanessa Finaughty edited the report. Natalie Domeisen and Evelyn Seltier, ITC, provided editorial and quality management. Serge Adeagbo and Franco Iacovino, ITC, provided graphical and printing support. This report was prepared as part of the ITC project ‘Enhancing Export Capacities of Asian Least Developed Countries (LDCs) for Intraregional Trade’, supported by the Ministry of Commerce of the People’s Republic of China. The project’s goal is to increase exports of small and medium-sized enterprises from six Asian LDCs – Afghanistan, Bangladesh, Cambodia, the Lao People’s Democratic Republic, Myanmar and Nepal – to China. iv
How to reach Chinese e-consumers
Contents
Foreword iii
Acknowledgements iv
Acronyms and abbreviations vii
Executive summary viii
E-COMMERCE IN CHINA 1
Access to the Chinese market 4
RULES AND COMPLIANCE 5
The shifting sand of rules and practices 5
Product requirements 5
Intellectual property 6
Import taxes and duties 11
Order fulfilment 13
POTENTIAL PARTNERS 19
Operational agencies: Tmall Partners 19
Logistics partners 20
Payment solutions providers 20
E-commerce integrators 21
PREPARING PRODUCTS FOR SALE 22
Studying the market 22
Product and seller page content 29
HOW TO SELL 33
About cross-border marketplaces 33
Differences between marketplaces 34
B2C generalist marketplaces 34
B2C hypermarkets 37
B2C vertical marketplaces 37
Flash sales marketplaces 38
B2B domestic marketplaces 38
C2C marketplaces 39
App and social media 43
Strategy to access marketplaces 43
v
How to reach Chinese e-consumers
Opening an account 43
Aiming big and starting small 44
Case study: How to join the Royal Mail Tmall store 45
PROMOTION AND COMMUNICATION 49
Chinese festivals 49
Offline promotion 52
The role of social media 53
Annex I: Marketplaces and information 55
Annex II: Brand transliteration for Sindhiya 58
Tables and figures
Table 1: Transport modes in China ................................................................................................................. 12
Table 2: E-commerce payment solutions in China .......................................................................................... 21
Table 3: Comparing Tmall and Tmall Global ................................................................................................... 34
Table 4: Key Chinese festivals ........................................................................................................................ 49
Table 5: Chinese social media platforms......................................................................................................... 53
Figure 1: Cross-border e-commerce development, 2015/2020......................................................................... 2
Figure 2: Most popular products (business to consumer) ................................................................................. 2
Figure 3: Motivations of buyers (business to consumer)................................................................................... 3
Figure 4: Cross-border transactions in China (¥ trillion).................................................................................... 3
Figure 5: Direct import of goods ...................................................................................................................... 13
Figure 6: Bonded import of goods ................................................................................................................... 14
Figure 7: Major cross-border e-commerce platforms ...................................................................................... 33
Figure 7: Accessing Chinese e-consumers via online marketplaces .............................................................. 44
Figure 8: Top five brands by product categoriesTmall .................................................................................... 52
vi
How to reach Chinese e-consumers
Acronyms and abbreviations
Unless otherwise specified, all references to dollars ($) are to United States dollars, and all references to tons
are to metric tons.
AQSIQ General Administration of Quality Supervision, Inspection and Quarantine of the People's
Republic of China
B2C Business to consumer
B2B Business to business
C2C Consumer to consumer
CIQ China Inspection and Quarantine
ID Identity document
IP Intellectual property
KOL Key opinion leader
LDC Least developed country
Tmall Tao Bao Mall
JD Jingdong
TP Tmall Partner
VAT Value added tax
vii
How to reach Chinese e-consumers Executive summary China is now the world’s largest e-commerce market and growing fast: online retailing is expected to grow from 17% of total retail sales in 2017 to 25% by 2020. This growing market is inevitably the focus of attention of foreign brands wishing to capture market share. So far, the ability to sell and market goods to Chinese consumers has been a specialist area, limited to well-known international brands with local distribution partners. The peculiarities of the Chinese market, beginning with an understanding of local language, culture and consumer needs, are not widely understood or mastered. Restrictions for access to local marketplaces mean that there are only a limited number of options to market goods in China: so far, these channels have remained relatively opaque to outsiders. This is now changing as a new segment of e-commerce begins to achieve widespread acceptance – cross-border e-commerce offers Chinese consumers the ability to purchase goods for direct import from abroad. In just a few years, this has achieved a high degree of awareness in China: according to Nielsen’s online shopper trend report, the proportion of consumers who had recently made a cross-border e-commerce purchase reached 67% in 2017, compared with only 34% in 2015. Service partners handling the local logistics, payments and listings are supporting cross-border e-commerce sites in China. They are referred to as Tmall Partners after the leading domestic e-commerce platform, Tmall (Tao Bao Mall, owned by Alibaba). Tmall Partners facilitate entry into the Chinese cross-border e-commerce marketplaces (including sites other than Tmall) on behalf of foreign clients. The Chinese Government is facilitating the development of cross-border e-commerce by simplifying and reducing import taxes on goods (with a limitation in annual value to each consumer). These changes open the door to much greater participation by foreign firms in the domestic Chinese e-commerce market. Before this potential can be realized, however, there is a significant amount of preparation required. Studying the market and understanding local demand and price points is a good starting point: a niche of high disposable income Chinese consumers are willing to pay premium prices, but it is important to understand how they judge quality. Crucially, any firm wishing to sell its products directly on e-commerce sites must prove that it owns the trademark or the right to be trading in the goods. For small foreign firms, registering a trademark acceptable in China is a critical step. Effective analysis to select the appropriate marketplace for different kinds of goods is an important step – aided by a number of online tools described in this guide. Registering to open an account one-commerce sites requires careful preparation of the required information about the company and documents such as proof of trademark ownership. In many cases, Tmall Partners can assist with these requirements. The amount of duties and taxes payable on import depends on the manner in which the goods are shipped into the country: the most favourable way to do so is under the cross-border e-commerce agreements when taxes and duties are as low as 11.9%. Achieving sales in cross-border e-commerce requires an understanding of Chinese social media and buying habits in e-commerce: in particular, around festivals and holidays, and the major annual sales event ‘double 11’ (11 November). Chinese consumers are most active around these times – and most willing to explore new and prestigious foreign goods. To master these, as with many other details of marketing towards Chinese consumers, there is no substitute for having local experience. This guide recommends working with a Chinese partner or at the very least having a Chinese-speaking associate within the team. Finally, the guide provides step-by-step examples in relevant areas for how firms can research and prepare their goods for export into China. A case study shows how the Royal Mail facilitated small firms in the United Kingdom to access a jointly managed Tmall store. The guidelines give ideas on researching marketplaces, selecting partners and understanding import requirements. viii
How to reach Chinese e-consumers
E-COMMERCE IN CHINA
What is cross-border e-commerce?
Cross-border e-commerce, in the broad sense, means selling to customers via online channels across
national borders. In China, the term has a specific sense: it is used to describe the activity of selling products
to Chinese consumers via online stores, shipping products across borders through international couriers.
The products do not enter China before the order is submitted, and they are delivered one by one to each
customer. Warehouses and inventory can physically be in the retailer’s own country, in Hong Kong SAR, or
in one of China’s free trade zones.
Cross-border e-commerce can refer to online trade between a business (retailer or brand) and a consumer
(B2C), as is the case on Tmall.hk and JD worldwide (Jingdong). It can also be between two businesses,
often brands or wholesalers (B2B), as is the case on Alibaba.com. The third type of e-commerce is between
two private persons (C2C), as is done via marketplaces such as Taobao.com.
Why cross-border e-commerce?
Cross-border e-commerce is a specific government policy rolled out in China to give foreign brands easier
access to the vast Chinese consumer market. It is a cooperation venture between several government
departments, particularly the State Administration of Taxation, Chinese Customs, and the major Chinese
cross-border e-commerce sites mentioned (Tmall Global and JD Worldwide).
Cross-border e-commerce eliminates the requirement to be a local company to sell imported goods. Sales
transactions are done directly by the brands to customers in China. The Chinese customer is the importer
on record for cross-border e-commerce in China.
This business model offers advantages for both buyers and sellers. Sellers (both retailers and brands) can
expand their business outside their often-saturated home market and tap into new markets. Buyers can have
more variety than that in the domestic market.
Statistics and potential
A joint research project by Alibaba and consultancy firm Accenture has predicted that global cross-border e-
commerce retail transactions are expected to hit $994 billion by 2020, with China’s e-commerce market to
grow tenfold.
This growth is from a 2014 global base of $240 billion. The Asia-Pacific region is expected to contribute as
much as 48% of total value, thanks to the development of internet networks and high adoption of
smartphones.
1How to reach Chinese e-consumers
Figure 1: Cross-border e-commerce development, 2015/2020
Source: Alipay, McKinsey.
Note: ~22 indicates that the share of cross-border e-commerce business in 2020 is an estimate (at 22%).
The trends for 2017 were:
x Cross-border e-commerce will continue to grow and is expected to reach a ¥ 7.5 trillion volume in
2017 (€0.96 trillion or $1.13 trillion);
x In 2017, 58 million Chinese customers were expected to engage in cross-border transactions;
x In the first half of 2017, 36.9% of orders were between ¥300 ¥1,000 ($45 to $150);
x Among cross-border buyers, the frequency of purchase was high: 65% of users purchased cross-
border at least once a month; 11.6% did so more than once a week;
x The top product categories are cosmetics, food and healthcare, mother and child, clothing and shoes,
and electronics (3C – computing, communication and consumer) products.
Figure 2: Most popular products (business to consumer)
Source: iResearch, 2016.
2How to reach Chinese e-consumers
Figure 3: Motivations of buyers (business to consumer)
Source: iResearch, 2016.
China is expected to become the largest cross-border B2C market in the world by 2020, with more than 200
million shoppers purchasing $245 billion worth of imported goods online.
Business to consumer users are growing faster than the overall cross-border market, although the growth
rate is expected to decline as the number of cross-border buyers converges with the overall number of e-
commerce users. By 2018, China will potentially have approximately 74 million B2C buyers.
Figure 4: Cross-border transactions in China (¥ trillion)
Source: iiMedia Research.
The cross-border e-commerce market is expected to reach ¥7.5 trillion ($1.13 trillion) in 2017, (this
includes both B2C and B2B cross-border e-commerce).
3How to reach Chinese e-consumers Access to the Chinese market By using cross-border e-commerce, in contrast to domestic e-commerce, brands can avoid the need to establish a legal or physical business presence in Mainland China preceding their e-commerce ventures. The most significant advantages are reduced import taxes and faster product compliance checks applied to certain products under China’s Postal Tax Policy. Whereas traditional (offline) channels of trade require different levels of procedures to export goods to China (such as China Inspection and Quarantine (CIQ) compliance checks and product registrations), these requirements are not mandatory for cross-border e-commerce. According to experts’ estimations, a seller exporting via the cross-border e-commerce scheme can save up to 30% in logistics and fiscal costs compared to exporting using traditional processes. Product clearance and dispatch times at the border are considerably faster. After a Chinese consumer places an order through cross-border e-commerce sites, the products go through customs clearance directly at the bonded area and are released faster for last mile delivery. Consumers will normally receive their goods within two to three days from the order date. To conclude, cross-border e-commerce gives foreign companies a new way to access the Chinese online consumer market directly, faster and in a cost-effective manner. 4
How to reach Chinese e-consumers
RULES AND COMPLIANCE
The shifting sand of rules and practices
With more than 1.4 billion people, the Chinese market is an enormous market opportunity. However, it does
not necessarily follow that a foreign seller will succeed even if only a small percentage of the population
could be reached.
To achieve success, a company has to be very flexible and must keep updated with e-commerce regulations
and trends, as they are constantly changing. Opening an online store takes time and financial investment,
and requires understanding of and conformity with many procedures. It also requires that a foreign company
adapt its strategy to the local habits of the Chinese market.
Overall, in Asia, doing business does not fully rely on a purely corporate and legalistic basis. People and
companies rely to a much greater degree on “human connections” (referred to as guanxi in Chinese) in
conducting business. Networking is, therefore, very important to facilitate entry to the market. Because the
rules are not well defined or well understood, a foreign business will often have the feeling that it is operating
in a so-called grey area.
A positive factor for success is a foreign company assisted by native Chinese partners to help close deals,
and understand the local culture and complexities of the market. The Chinese partner can also compensate
for the compliance barrier of certain marketplaces. For example, the local marketplace Taobao.com and
social media WeChat (see chapter 4 for more details) require having the national identification card of a
Chinese citizen.
In such situations, a foreign company has three options (e.g. to open a Taobao store):
x Hire a Chinese employee;
x Hire a Chinese intern;
x Use a third-party service provider.
In all cases, the responsibility is shared with the partner whose name and identification information is used.
At the same time, the foreign company will be fully responsible for the operations and remain the owner and
the responsible party for the trade, payment and products.
Product requirements
After being in contact with marketplaces or others online distributors, a seller will need to prepare its products
and company to sell in China.
Before reaching the Chinese customs and inspection authorities, exporters to China need to prepare and
present the usual export documentation, which should include at least the following:
x Certificates of origin
x Customs declarations
x Sales contracts
x Bills of lading
x Commercial invoices
x Packing lists
In addition to the traditional export and import documents, different types of certifications or permits may be
needed depending on the product type. Import permits and certifications are usually delivered by the General
Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China (AQSIQ).
5How to reach Chinese e-consumers
Certain products, such as food or animal products, need to be inspected before customs authorities can do
the import clearance. The authority in charge of this type of inspection is also the AQSIQ. This authority is in
charge of national import and export commodity inspection and has offices or representations in
municipalities and port provinces. The AQSIQ also relies on networks of distribution centres and affiliated
China Inspection and Quarantine (CIQ) centres. In many cases of food products, an import licence must be
applied for and obtained before importing products to China.
Some of these import authorizations and certificates are:
x China Compulsory Certification (CCC) is a standardization certification similar to the European CE
certificate. It usually applies to electronic and electric devices.
x China Energy Label (CEL) is an energy consumption label and certification that is compulsory for
electronic products.
x China Food and Drug Administration (CFDA) is a certification for medical devices.
x China Inspection and Quarantine (CIQ) can provide a declaration in order to attest that a given
product does not require any CCC document and, therefore, the item can be released for customs
clearance.
More information can be found on the AQSIQ authority’s official website 2 and additional guidance can be
obtained from freight forwarders or import and certifications agents such as China Certification. 3
Intellectual property
Similar to building a house, the foundations need to be in place. It is very important to have the right protection
for a company and a brand as well as any specific design aspects of what is offered. This intellectual property
measure is a key market preparation step before a company takes any physical product into China.
Intellectual property concerns three overlapping areas between trademark, design and copyright protection.
They are collectively known as trademark protection. The main factors to consider are as follows:
x A trademark could be a word or a graphic, such as a logo. In some cases, there is only a graphic mark
with no word; an example would be the Nike Swoosh. Either the word or the word and the graphic can
be registered.
x The product’s design, shape or patterns may also be important as part of the branding and can be
registered. That is the case with the Toblerone and KitKat brands.
x Graphics and, in some cases, shapes can be registered as trademarks with or without a word (e.g.
the Nike Swoosh).
Such possibilities of protection give rise to a set of choices for sellers that can appear complex and confusing.
Namely, for what to register, and whether to register as a trademark or a graphic or both, it is better to work
with a trademark attorney who can coordinate with their attorneys in China.
2
http://english.aqsiq.gov.cn/.
3
https://www.china-certification.com/.
6How to reach Chinese e-consumers
There are no countries where trademark registration is legally compulsory before trading. However, retail
partners and marketplaces in China usually want to see the mark registered before concluding commercial
terms.
Word marks should be registered as trademarks, and, where budget is limited, any logo or variation can be
submitted as part of the application. If the logo graphic is important in itself, and where funds are available,
separate registration of both the word and the graphic may be best.
The main advantage of trademark registration is that the seller keeps the rights alive indefinitely. Trademark
registration rights are limited to the classes covered. Therefore, careful attention needs to be paid to which
product classes are chosen in the application.
Sellers are advised to secure trademark registration as a minimum. Trademarks last for 10 years before
requiring renewal and can be registered for as little as $250. Trademark attorney fees need to be added to
this cost. The trademark would be secured internationally provided filings are made in other markets before
the end of the six months, for which additional fees may be due. The danger of delaying registration, whether
as a trademark or a graphic, is the difficulty stopping copying or registration by someone else, which could
result in a loss of ability to trade or at least the loss of the ability to use the trademark.
There is an additional level of registration that is possible, called “design” registration, where the shape,
design or pattern of the product is integral to the trademark. Design application costs $800, but annual fees
are payable, and, in most cases, designs need to be renewed every 3–5 years. As a guide, a figure of $1,400
per country should be budgeted to register the design in each country selected. Local attorneys will usually
be required for handling national applications. In China, national trademark application requires the use of a
China-registered attorney.
Trademarks
A trademark, or at least proof of a trademark, application is often required by online marketplaces in China.
Tmall and JD require a trademark before accepting a new brand or product. Customs authorities may also
inquire about trademark documentation during the import and clearance process.
Besides being required by different stakeholders in a China market access project, trademarks are also
important to protect one brand and to build trust with Chinese consumers. A trademark is, therefore, an
almost inevitable requirement before thinking of the Chinese market.
Local registration and international extension: In addition to national registration in China, it is also
possible to use a local filing in the enterprise’s country and use the Madrid Protocol (international trademark
system) application, which is done directly via the World Intellectual Property Organization (WIPO).
Registration can be cheaper, as a local attorney is not required. It is also possible to cover several classes
in one application, whereas national applications are a single class (see http://www.wipo.int/madrid/en/).
Search existing and similar marks in China: The Trademark Office of the State Administration For Industry
and Commerce of the People’s Republic of China website 4 (English version) can be used for research. Within
the links section is a useful free search tool for trademark searching. Please note that the search function
does not always work smoothly.
China national trademark registration: Consider registering a Chinese name translation or transliteration
of the mark, as most consumers will not read or recognize an English or Latin brand name and will give it a
nickname that may not be desirable.
4
http://www.saic.gov.cn/english/Links/.
7How to reach Chinese e-consumers Trademark classes: Classes are specific fields or categories in which a mark can be registered. Be aware of classification nuances. China operates an unusual and not entirely logical set of sub-classes, so it is important to ensure that the correct ones are registered. Registration costs: National China registration fees are applicable for each classification. The costs increase if a brand needs to be protected in multiple classes. Trademark non-use ruling: Non-use of a trademark period in China is only three years, compared to five years in most other countries. Such a rule can be useful when faced with an unauthorized registration. These are seldom used and are what is called “trademark squatting”. They may already be a couple of years old if the opportunist could see the brand outside China. Hong Kong coverage: Registration in China does not cover Hong Kong, which requires registration separately. Hong Kong is not a member of the Madrid Protocol, so must be covered with a local filing and government fees start at $290 for one product class. Copyright option: China is one of the very few countries where copyright (which could include the shapes of products, designs on packaging and so forth) can be registered and doing so provides additional benefits against copying. Trademark enforcement: Once a trademark is registered, the holder of the mark can apply to the local enforcement and customs offices, which will help police the mark in well-known counterfeit markets and at the borders. A policing service is possible in the UNITED KINGDOM and may be possible in other countries such as China. Here are some links to trademarks information: China Trademark registration EU SMEs guidebook, China Trademark Registration Certificate, trademark fees and design patent guide. Trademark registration Sindhiya brand case study: This section offers step-by-step guidance on how to prepare for trademark registration in China. We use a real example of an application from a Bangladesh-based company called Sindhiya, which produces and distributes herbal-based cosmetic and health products. The application is prepared and followed up by a China-based intellectual property law firm. A company can register multiple brands in multiple classes, and each brand can be registered as an English or Latin character version and as a Chinese version. A company may register its company name as a brand, but may also want to register its product names. In this case, we are registering the company name as it appears on all products and the product names are generic names. Step 1: Fill in the company and trademark information form Before starting a trademark application, a business needs to fill in a general information form that requires information about the following. Trademark specimen: It is the visual representation of the trademark. It can be an image or text using a specific style unique to the brand. Here, the company needs to provide a high-definition picture of the logo or device mark. Colours claimed: For some trademarks, a company may claim to be using a specific spectrum of colour, such as the specific red colour of the Coca-Cola brand. Unless the mark uses specific and unique colours, it is suggested to file the mark in black and white, as it may provide broader protection of the mark. Here, the applicant needs to circle “YES” to claim a colour or “NO” to apply as a black and white colour. Applicant’s name: It should be the company name as specified in the company registration document. Applicant’s name in Chinese: If applicable and a Chinese version of the company name has been adopted, enter the Chinese characters here. Otherwise, leave blank. The IP partner may propose a transliteration of the company name in Chinese. 8
How to reach Chinese e-consumers
Applicant’s address: This should be the company’s registered address, as mentioned in the certification of
registration.
Applicant’s address in Chinese: If the company has a China-based address, it can be included; otherwise,
this field is to be left blank.
Priority claimed: Priority right can be claimed where any trademark applicant first filed a trademark
application in a foreign country within the preceding six months and filed an application in China for
registration of the same trademark in respect of the goods or services in the same class.
Class and designated goods and services: The classification of goods or services is based on the ‘Nice
Classification, 10th Edition’. The applicant may identify one or more classes he is interested in, but it is
advisable to obtain the advice and selection priority of a China-based IP partner. If none of the classes make
sense for the applicant, this field can be left blank, and the IP partner will study and suggest the best classes
to go for.
Important: In the classes field, the applicant can also describe the type of products or services that are to
be distributed with enough details as to the composition and functionalities of the product or service, so that
the IP partner may select the most appropriate class or set of classes. If the company has a website, a
brochure or technical documentation on its products and services, it is strongly advised to share them with
the IP partner.
Step 2: Sign a power of attorney with the intellectual property partner
Any Chinese national trademark application must be registered
through a local IP lawyer. The IP partner, therefore, prepares and
applies on behalf of the foreign applicant. The Chinese IP partner will
be the first point of communication with the Chinese IP authorities.
To do so, the IP partner needs to provide the proof that he has been
assigned this task and duty by the foreign applicant. By filling in and
signing the power of attorney, the applicant is officially appointing the
IP partner and delegating to them the authority to represent the
applicant in the application for the trademark. The following
information needs to be filled in:
x Country of registration of the applicant company;
x Trademark name in English or Chinese transliteration;
x Select for which activities the applicant is giving power of attorney.
At least the trademark registration should be checked;
x Applicant’s full name followed by “on behalf of Company Name”;
x Fill in applicant’s official address (as in company certificate);
x Sign and date and apply company stamp if available.
Step 3: Copies of company documents
The IP law firm will need a copy of the applicant’s company documents.
Certificate of incorporation: This is the document provided by the local authority in charge of company
formation and registration. It can be named differently in some countries, for instance, “registration certificate”
in Commonwealth countries, or “Certificat Négatif ou d´immatriculation” in West African Francophone
countries. This document displays the date of the company’s registration along with the basic information
9How to reach Chinese e-consumers
about the company’s registered address, the company name and trading name if different, the registration
number, the fiscal identification number (in some cases) and the stamp and letterhead of the registration
authority.
The IP partner needs to receive the copies in digital format in colour. A signed English copy is required if the
initial documents are in another language. A self-translation from the original language to English can be
presented as a word document beside or joined to the original language document.
Step 4: Review of proposed classes
The World Intellectual Property Organization (WIPO) link below leads to the 19th edition of the ‘Nice
Classification’ for international trademarks. A given product or service may fall under more than one class
and some classes may overlap. The applicant should at least be able to identify the most appropriate class
in general terms and request the IP partner to advise on different or complementing classes. Once the class
or classes’ numbers are identified, this information can be added to the application form.
In the case of the trademark Sindhiya, Class 3 and potentially Class 5 have been identified.
Class 3: Bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and
abrasive preparations; soaps; perfumery, essential oils, cosmetics and hair lotions; dentifrices.
Class 5: Pharmaceutical and veterinary preparations; sanitary preparations for medical purposes; dietetic
food and substances adapted for medical or veterinary use, food for babies; dietary supplements for humans
and animals; plasters, materials for dressings; material for stopping teeth and dental wax; disinfectants;
preparations for destroying vermin; fungicides and herbicides.
Initial research in these classes has found no prior identical or similar marks being registered. The subject
mark should, therefore, be available for application. However, this cannot be confirmed with certainty,
because, due to the China Trademark Office (CTMO) database update delay, the search does not cover the
application(s) filed in the latest 4–6 months.
The search is somewhat subject to IP attorneys’ opinions on the trademark similarity, and it is possible that
the examiners have different opinions or decisions in the examination. Despite the thoroughness of an IP
attorney effort in conducting the subject searches, there may still be certain inherent limitations due to which
a potential conflict may not be absolutely eliminated.
Given these circumstances, IP partners often have a policy to conduct a trademark search by two different
trademark attorneys to keep the result as accurate as possible. This way, they can compare and align their
opinions and former application histories and experiences to better serve the applicant.
To search for a trademark, visit the World Intellectual Property Organization. 5
Step 5: Review of transliteration options
It is important, as far as possible, to invest in the transliteration of a foreign brand into Chinese. This is to
avoid the Chinese consumer market or importers choosing a wrong or detrimental transliteration, which can
reduce the message carried by the brand.
To see transliteration propositions for our Sindhiya case, please refer to Annex II.
5
http://www.wipo.int/classifications/nice/nclpub/en/fr/home.xhtml.
10How to reach Chinese e-consumers
Step 6: Trademark submission confirmation and Tmall brand approval
As the process of a trademark registration may take up to 14 months before the China IP office delivers the
final certificate, the applicant is encouraged to obtain from the IP partner a proof of application submission
and payment of registration fees. This information and document can then be presented to Tmall or other
Chinese marketplaces to have the brand name accepted and start listing products online.
Step 7: Reception of the trademark certificate
Once the trademark application process is finalized and no objections from other parties claiming the same
trademark in the same classes have been raised, the Chinese IP authorities will deliver the certificate of the
trademark. Such certificate is valid for 10 years.
Import taxes and duties
On 8 April 2016, the Chinese Government introduced a new tax regime for cross-border e-commerce,
facilitating fairness of trading. A whitelist of more than 1,100 commodity items has been published, mostly
focussing on these product categories: clothing, food and beverages, personal electronics, shoes, hats,
fashion accessories, children’s toys and certain types of cosmetics.
The value of imported commodities shall be set to a limit of ¥2,000 per single transaction and limit of ¥20,000
per individual per annum. Transactions within this limit enjoy zero import tariffs, but are still levied with import
value added tax (VAT), charged at 70% of the taxable amount.
Besides personal effects, there is no more tax exemption for goods with a taxable amount of less than ¥50.
This means that the import will benefit from a reduced import sales tax of 11.9% (instead of 17%) if sold
through cross-border e-commerce.
If a Chinese consumer orders goods over the transaction limits, the goods will be classed as ‘personal
effects’ (for one item) or traditional trade (for multiple items > ¥2,000) and no longer subject to the preferential
cross-border e-commerce tax rates.
Delivering parcels into China
The seller will need to determine the best type of shipping and delivery for each type of order.
If the buyer is willing to share his or her national ID copy, B2C and bonded warehouse methods are the most
cost-effective options for both taxes and transport costs and delays. However, the B2C and bonded
warehouse options require CIQ clearance.
If import certifications and buyer identity documentation are not available, the seller has only postal shipping
as an option unless he or someone travels physically to China to import as “personal entry”.
Depending on the shipping method used, the taxes and import requirements for a given product may change.
Table 1 summarizes these differences.
11How to reach Chinese e-consumers
Table 1: Transport modes in China
Attributes Postal Personal entry B2C Bonded warehouse
Tracking Tracked Tracked Tracked Tracked
Last mile CN Post, EMS Varies Varies Varies
Logistics cost High costs Cheapest Cheapest Lowest-cost option
15%, 30% and
Duties and VAT 15%, 30% and 60% 11.9% 11.9%
60%
De minimis ¥ 50 ¥ 50 No de minimis No de minimis
Percentage of items
Random inspection Duty always paid Duty always paid Duty always paid
checked
Not paid in
Duty at delivery advance; customer Duties prepaid Duties prepaid Duties prepaid
may reject order
Delays during busy
Delivery times more Stable shipping 2–3 days shipping
Speed and reliability periods (e.g.
consistent time time
11/11)
CIQ clearance Not required Not required Required Required
Animal testing Not required Not required On specific items On specific items
Personal ID and Personal ID and
Data requirements No data required Personal ID info only
payment details payment details
Lowest tax level if
Small stock; high
High-value items For duty paid in tax is an issue,
volume; very fast
Suitability (less likely to be advance. More and can’t get
shipping. Heavy
taxed) consistent. Cheaper. under the de
items. Overstock risk.
minimis
Source: Avenue51 corporate brochure, 2017.
12How to reach Chinese e-consumers
Order fulfilment
Export strategy
There are four different ways to export goods into China.
Stock held in China: This logistics solution is suitable for a mature company that can hold and control stock
in China. This is the fastest way to deliver to the final customer. However, it is also the riskiest one, as it
means incurring costs before selling the product. The business will need to ensure that the inventory will not
remain unsold for a long period (due to storage fees and product degradation).
Hong Kong as a consolidation gateway: Hong Kong allows international companies to import and store
inventory of products in its territory without applying import taxes and duties. This option allows a foreign
seller to ship a given inventory or a consolidated number of orders in bulk to Hong Kong, where the palette
can be separated into individual parcels already labelled for the final Chinese consumer. The individual
parcels are then shipped to China via the Hongkong Post.
Figure 5: Direct import of goods
Source: http://economists-pick-research.hktdc.com/business-news/article/Research-Articles/Mainland-Cross-border-E-Commerce-
Opportunities-for-Hong-Kong-Businesses/rp/en/1/1X000000/1X0A3HYN.htm
13How to reach Chinese e-consumers Step-by-step order packing and shipping To make sure that products get to the final destination without any trouble, it is essential to get the paperwork and shipping documentation right. Courier companies such as DHL, UPS or FedEx or third party providers will handle everything and deliver to the final customer’s door. Shipping of parcels should follow a packaging preparation process. Below is an example of packing a parcel to be sent via EMS (carrier) through Hongkong Post. Figure 6: Bonded import of goods Source: http://economists-pick-research.hktdc.com/business-news/article/Research-Articles/Mainland-Cross-border-E-Commerce- Opportunities-for-Hong-Kong-Businesses/rp/en/1/1X000000/1X0A3HYN.htm 14
How to reach Chinese e-consumers
Step 1
Check the weight and size limit of the posting destination (Mainland China, Chinese Taipei or Hong Kong
SAR, etc.).
Step 2
Fill in the posting form.
A. Sender’s full name, address and telephone number or fax number must be completed.
B. Addressee’s full name, address, including the country of destination, city, postal code, telephone
number or fax number must be completed.
C. Tick the appropriate box specifying the category of item.
D. Detailed description, quantity and unit of measurement for each article (e.g. 1 electrical toy car with
two pieces of AA batteries detached, or 3 pieces of cotton shirt for men).
E. Senders of commercial items, if known, indicate the HS tariff number (which must be based on
the Harmonized Commodity Description and Coding System developed by the World Customs
Organization) and the country where the goods originated (including production, manufacture or
assembly).
F. The net weight of each article (in kg).
G. The total weight of the item (in kg).
H. The declared value of each article, indicating the currency used (the declared value must be the
same as that in the invoice or it may delay customs clearance).
I. The total value of the item, indicating the currency used.
J. The number of certificates and invoices attached.
15How to reach Chinese e-consumers
K. If insurance is required for the shipments or not.
L. Date and signature.
M. The personal data provided in the packaging will be used by the Hongkong Post for processing the
parcel. The sender and receiver information may be used for promotional and analysis research by
the Hongkong Post. If such information is not to be shared, one needs to check the related box "3".
Step 3
Fill in applicable customs declaration form.
A. Sender’s full name, address and customs reference (if any) MUST be completed.
B. Addressee’s full name and address, including the country of destination, MUST be completed.
C. Indicate the importer’s reference (if any) and tax code, VAT number and importer code (if applicable).
D. Indicate the importer’s telephone, fax and e-mail (if known).
E. Give a detailed description of each article in the parcel.
F. Indicate the quantity of each article and the unit of measurement used.
G. Indicate the net weight of each article (in kg).
H. Indicate the total weight of the item (in kg).
I. Give the value of each article, indicating the currency used.
J. Give the total value of the parcel, indicating the currency used.
16How to reach Chinese e-consumers
K. Senders of commercial items MUST indicate the HS tariff number, which must be based on
the Harmonized Commodity Description and Coding System developed by the World Customs
Organization.
L. Senders of commercial items MUST indicate the country where the goods originated (including
production, manufacture or assembly).
M. Indicate the amount of postage paid for the item posted and specify any other charges, e.g.
insurance.
N. Tick the appropriate box or boxes specifying the category of item.
O. Provide details if the contents are subject to quarantine (plant, animal or food products, etc.) or other
restrictions.
P. If the item is accompanied by a licence or a certificate, please tick the appropriate box and state the
number. Seller MUST attach an invoice for all commercial items.
Q. Not required to fill in (reserved for postal/customas administration).
R. Write down the date and sign.
Step 4
Prepare the commercial invoice.
A commercial invoice is required if the posted item is not a document. The required number of copies of the
invoice should be enclosed in an envelope and attached securely to the item sent.
17How to reach Chinese e-consumers
Each invoice should have a company letterhead (not applicable to personal items), typed in English
(handwritten is not valid) and provide the following information:
x Item number and information;
x Sender’s company, name, address and telephone number;
x Addressee’s company, name, address and telephone number;
x Country and city of destination;
x Goods’ description with true value, quantity and precise description (e.g. 1 silk scarf, and 3 bags,
etc.);
x Sender’s signature, date and company chop (company stamp or seal, not applicable to personal items)
in blue ink;
x Terms of delivery (e.g. CFR, D/C or FOB, etc.).
Step 5
Before posting, the carrier label tracking barcode label must be affixed to the lower left corner of the item
and the designated space on the address pack (post office copy) for identification purposes. The shipper
can obtain this label from a carrier directly or print it through an online carrier system.
18How to reach Chinese e-consumers
POTENTIAL PARTNERS
We have seen that cross-border marketplaces are the best way to start selling in China. However, it can be
difficult to do so as a foreign seller. The following section presents a non-exhaustive list of potential partners
who can assist in accessing the Chinese market.
Operational agencies: Tmall Partners
Tmall Partners (TP) help foreign firms develop business in China through local e-commerce marketplaces –
including Tmall and its competitors. TPs are agencies certified by Tmall to help sellers with their marketing,
logistics, IP protection, IT development and more. Tmall Global accepts foreign merchants only if they work
with a TP. Such agencies are selected by multiple criteria, including years of experience working with cross-
border e-commerce in China, bonded warehousing options and multilingual skills of staff, etc.
One of the most important reasons for collaborating with TPs is that they speak the local language. They
can assist international brands with quick responses to consumers. They are experts in the local market,
knowing exactly how Chinese consumers behave and what they expect. Finally, they have a rich experience
working with foreign brands, being able to bridge the gap between a brand image abroad and in China.
The term TP is now a common word to talk about a third-party operations provider. Besides basic store set-
up, TPs can assist with almost everything. Below is a list of the tasks TPs perform for foreign merchants:
x Analyse the product’s potential, brand in China and select the relevant platforms;
x Complete negotiations and sign contracts;
x Determine compatibility and resource requirements (warehouse, stock, company and brand
registration, etc.);
x Help to handle the process of trade registration if needed;
x Store application with merchant and product information;
x Alipay overseas account application;
x Store preparation and launch;
x Order fulfilment, strategic eStore planning, marketing and store operations;
x Customer service and online chat.
How TPs invoice merchants:
x A commission on sales revenues (percentage);
x Approximately $6,500 a month for store operations: strategy, market research, store management,
support with the marketplace team, daily store operations, store design and campaign pages,
marketing management, customer service in Chinese and return management.
A list of Alibaba-selected TPs for Tmall can be found at https://goo.gl/VzTTNJ.
A list of Taobao-certified partners can be found at https://goo.gl/JvesMh.
A seller can contact the agencies directly and present their project. TPs will be able to give an answer about
the product’s potential in China and accept or reject serving the foreign business.
19How to reach Chinese e-consumers
Logistics partners
Following is a list of selected import and export logistics services providers who have expertise in cross-
border e-commerce. They will help to choose the right logistics solution and to manage local warehousing,
fulfilment operations and logistics software integrations.
These logistics service providers will not necessarily have a subsidiary in the seller’s origin country, but most
will be able to propose a hub in the area of the Republic of Singapore or another part of South Asia.
x ChUnited Kingdomou1ฟཱྀ᫆: http://www.chUnited Kingdomou1.com/
x 4PX忹⛂㖠: http://www.4px.com/
x SFC ୕: English http://www.sendfromchina.com, Chinese: http://www.sfcservice.com/
x YDF logistics ᫆㎹୳: http://www.ydflogistics.com
x Yanwen ⇩ᩥ: http://www.yw56.com.cn
x Easy Storage ዲ᫆Ẻ: http://en.easystorage-china.com
x Dafang᪉≀ὶ http://www.dafanglogistics.com
Payment solutions providers
A seller can receive payments from different payment systems such as Alipay and WeChat Pay. There are
a few third-party payment solutions that can help receive the payment in a fast and easy way, in the expected
currency and by bank transfer to the seller’s origin country bank account. The two large international payment
aggregators who can accept Alipay and WeChat payments are Stripe.com 6 and Adyen.com.
Based on 2017 (Q1) data, Alipay keeps leading the market with a market share of 34.71%. UnionPay is not
left far behind 22.44%, while Tencent Holdings Limited (WeChat Pay) takes a market share of 15.37%
(source: ᫆奪㘢⸻!analysis).
As a foreigner seller, to receive payment, one will have to open a Chinese domestic bank account or a digital
payment solution account such as Alipay and WeChat Pay.
Alipay is available for sellers from all LDC Asian countries except Nepal and Myanmar.
6
https://stripe.com/global and https://www.adyen.com/landing/fr_FR/online/global/whitepaper-china-payment-guide.
20How to reach Chinese e-consumers
Table 2: E-commerce payment solutions in China
Payment Alipay JD Pay Tenpay (WeChat Pay)
services
Commission 1% Negotiated by seller 0.6%
Currency paid USD, EUR, JPY, GBP, $, €, £
to seller CAD, AUD, SGD, CHF,
SEK, DKK, NOK, NZD,
THB, HKD
Bank account An account in any of the $ ¥ or $
required for currencies above
service to pay
seller
Settlement 21 days Monthly Immediately
period
Settlement $5 000 Negotiated by seller $5 000
amount
URL https://global.alipay.com http://www.jd.hk/service/joinus.html http://global.tenpay.com
E-commerce integrators
An e-commerce integrator is a technical solution provider that does the coordination between a company’s
e-commerce site and back-end information. There are various integrations such as an enterprise resource
planning (ERP) system or a customer relationship management (CRM) platform. The integrator also has the
technology feed between the marketplace and the warehouse with the stock outside China and delivers it to
the end consumer.
An integrator provider can manage, optimize and list all the product information directly by connecting the
product feeds to the target marketplace. They then keep inventory in sync and product orders organized,
and use in-depth analytics to sell smarter in multiple marketplaces.
Following are a few integrators that can help to manage product information and data feeds:
x Anatwine: http://anatwine.com
x Avenue51 (partner for Royal Mail store on Tmall): http://www.avenue51.com
x ChannelAdvisor: https://www.channeladvisor.com
x ChannelGrabber: https://www.channelgrabber.com
x Expandly: http://www.expandly.com
x Neteven (partner with Magic Panda on Tmall): https://www.neteven.com
x We are Pentagon: https://wearepentagon.com/
x PlentyMarkets: https://www.plentymarkets.co.United Kingdom
x Seller Express: www.sellerexpress.com
x StoreFeeder: http://www.storefeeder.com
x Volo: https://www.volocommerce.com
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